Anti-dumping, anti-subsidy and safeguard measures

Although committed to WTO’s free-market principles, governments often interfere in the economy by setting protectionist measures in an attempt to defend domestic industry and trade interests. Many countries, including the EU, impose stiff duties on products they believe are being dumped on their domestic market and/or supported by unfair subsidizing practices by foreign governments, undercutting local industries and markets. Anti-dumping, anti-subsidy and safeguard measures can have an enormous impact on international businesses and the economy and global trade as a whole.

What is anti-dumping?

A non-EU company is ‘dumping’ if it exports a product to the EU at a price lower than the normal value of the product, either based on the prices as sold on its home market, or on the cost of production and profit. An anti-dumping duty is a protectionist tariff that the EU may impose on third country imports that are believed to be priced below fair market value.

The European Commission has the power to investigate dumping claims and impose measures. Investigations are often opened upon complaints lodged by EU producers of the product concerned, if such complaints contain sufficient evidence that dumping takes place and causes injury. An anti-dumping measure may only be enforced if it is positively established that each of the following conditions are met:

  • Dumping by producers of the country of export concerned;
  • Material damage to EU industry;
  • A causal link between dumping and injury; and,
  • Measures are not in conflict with EU interests.

Anti-dumping measures are usually adopted in the form of an ‘ad valorem’ duty. Price undertakings, as we have seen in respect of Chinese solar panel imports, may also be proposed and accepted. Anti-dumping measures have to comply with the basic rules and procedures laid down in EU’s basic anti-dumping Regulation which implements the rules for anti-dumping set internationally in the WTO Anti-Dumping Agreement.

What is anti-subsidy?

A subsidy is a financial contribution made by a government giving a benefit to support industries. Unfair subsidies granted by foreign governments to competing industries in third countries are however considered to create unfair competition and to distort and damage the EU market and industry. Therefore, within the framework set by EU’s basic anti-subsidy Regulation, the EU can impose anti-subsidy duties to counteract a subsidy, provided that it is specific to a certain company, group of companies or industry sector.

An anti-subsidy investigation starts after the lodging of a complaint sufficiently demonstrating evidence of subsidy and injury.

Anti-subsidy measures (countervailing measures) may only be enforced if it is positively established that each of the following conditions are met:

  • Subsidy;
  • Material damage to EU industry;
  • A causal link between subsidy and injury; and,
  • Measures are not against EU interests.

What are safeguard measures?

Safeguards are intended for situations in which an EU industry is affected by an unforeseen, sharp and sudden increase of imports. The objective is to give the industry a temporary break to make necessary adjustments and to restructure. Strict conditions apply to imposing safeguard measures as unfair trade is not a precondition for the decision to adopt them.

The EU has to establish that the increase of imports:

  • is sharp and sudden;
  • due to unforeseen developments;
  • causes (or threatens to cause) substantial injury to domestic industry; and,
  • that safeguards measures are in the interest of the EU.

The safeguard procedure is somewhat different from anti-dumping and anti-subsidy procedures and the EU has been very reticent to apply safeguards up to now.

Investigations of OLAF and the collection of anti-dumping and anti-subsidy duties

Such measures are adopted after complaints have been lodged with the European Commission by EU domestic industries. Following the implementation of the anti-dumping and anti-subsidy measures, frequently suspicions arise that non-EU companies are putting in place simple or more sophisticated schemes and tactics to avoid paying the additional duties. Thus the unfair competition and market distortion caused by dumping and other undesirable practices are circumvented.

In such cases the European Anti-Fraud Office (OLAF) is regularly called in by the European Commission to investigate whether duties are actually evaded by for example circumvention, transshipment, misclassification, undervaluation or relocation of production to other third countries and to report on its findings. In case OLAF concludes that indeed duties are evaded, it will ‘recommend’ the customs authorities of the EU member states to impose additional customs claims and collect duties from importers. As the ad valorem percentages are usually high, the claims incurred may entail substantial amounts. Frauds occur, but in practice OLAF and national customs make mistakes too. Both importers in good faith and logistics service providers offering import services are at risk of becoming victims of frauds or unfairly imposed additional claims by customs.

As a significant percentage of all EU imports are declared for free circulation in the Netherlands, Dutch customs often plays a pivotal role in the collection of the allegedly evaded duties.

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